Can the taxes applied to the final value fee be deducted from the income tax?

[vitvol]

I don't seem to understand this one, and don't want to deduct what i am not allowed to. So i am selling as a small business owner, and ebay charges the gst/hst/qst (i am in Quebec) on the total fees of an item sold. In the example below, the total fees of the item that i am paying to Ebay is $39. Then, they add up the gst/hst/qst tax on the fee, which is $5.84, increasing the total to $44.85. My question is: can those $5.84 be deducted from the income taxes or this is something you're supposed to absorb?

[femmefan1946]

@vitvol 

What would be the downsides? I hear you had to charge the tax on sales, but now that ebay charges canadian buyers, you wouldn't be in charging the tax anymore, no?

EBay sellers who are registered to collect Canadian sales taxes no longer have to do that for their eBay sales.

EBay is doing it for them.

But the fee eBay/MP charges for payment processing, which includes the sales taxes paid by the buyer, is deductible.

And then there are Input Tax Credits, which I understand you can continue to deduct.

But seriously.

The free advice you get on the internet is worth every penny you pay for it.

Talk to you accountant.

Give her advance warning so she can read up on the new "internet" sales taxes.

[vitvol]

I am such a noob at this. I do work with an accountant, but they aren't exactly experienced with ebay, and i was unable to find one that is.

When you say "But the fee eBay/MP charges for payment processing, which includes the sales taxes paid by the buyer, is deductible.", is this the $5.85 that i've mentioned in my original post? I know that Ebay charges all Canadian buyers a sales tax, and the fees on my end are even bigger now. Want to deduct everything, but so lost in all these taxes and fees.

[ypdc_dennis]

If you are not registered to collect GST/HST then any sales tax on your fees is treated as just another business expense.   Income tax is paid on any profit you have (sales income minus expenses).

If you are registered to collect GST/HST, then any sales tax paid on fees is an ITC (Input Tax Credit) and is subtracted from any sales tax you were required to collect.  The difference, when you file your sales tax report, is either paid to the government (when positive) or refunded by the government to you (if negative).

-;-

[marnotom!]

 Are you registered to collect QST and GST/HST for sales made outside of eBay?

[vitvol]

I am not registered, no.

[marnotom!]

You should consider registering.  Here's some information on Input Tax Credits. Sorry I can't find the French page; Google directed me to the English one:

https://www.revenuquebec.ca/en/businesses/consumption-taxes/gsthst-and-qst/itcs-and-itrs/

[vitvol]

So from my understanding, if i do register, i will be able to deduct that $5.84 that ebay has charged me for the qst/gst/hst?

[marnotom!]

That's my understanding, but I would double-check with an accountant to make sure.  The tax system in Quebec works a bit differently than it does in other provinces.

[flipistics]

You need to consult a professional, but unless Quebec does something weird you should be able to claim them if you register. More than deducting them though, you actually claim them as input tax credits (meaning you get the full amount back). You also get back other taxes related to your business such as on shipping, packing materials, etc. There are some downsides too, but getting the taxes back as well as being able to write off a lot of things is well worth it imo.

[vitvol]

What would be the downsides? I hear you had to charge the tax on sales, but now that ebay charges canadian buyers, you wouldn't be in charging the tax anymore, no?

[femmefan1946]

When you say "But the fee eBay/MP charges for payment processing, which includes the sales taxes paid by the buyer, is deductible.", is this the $5.85 that i've mentioned in my original post? I know that Ebay charges all Canadian buyers a sales tax, and the fees on my end are even bigger now. Want to deduct everything, but so lost in all these taxes and fees.

EBay "processes" a sales tax , which is charged by the federal and provincial governments.

The sales tax is part of the buyer's payment.

We pay our fees on the whole of the buyer's payment.

Because eBay /Managed Payments processed the entire payment no matter why it was paid by the buyer.

And that fee on the payment is a tax deduction as a cost of doing business.

Let's use a sale to an Alberta buyer as an example.

The item sells for $100.

The shipping cost is $10.

The buyer is charged GST of 5% or $5.50.

The buyer pays $105.50.

You pay eBay FVF of 12.9% or $13.60 plus a non-refundable service fee of 30c.

That $13.90 is a cost of doing business and is deductible.

You receive $91.60 and use $10 of that to buy a shipping label.

And Managed Payments transfers $81.60 to your bank account.

[vitvol]

Thanks for the help. So from my understanding, the only additional amount i will be able to deduct with a gst/qst account is the tax applied on ebay fees?